On 13 February 2020, reasons for judgment were delivered in this matter. [1]
On that occasion I indicated that on my calculation, the compensatory damages to be awarded to the Plaintiff amounted to $11,900 and that the circumstances of the matter lead to the potential application of s 208 of the Residential Tenancies Act 2010 (NSW). [2]
Consequently, the entry of final orders was deferred with directions as follows:-
1. The parties to confer with a view to reach an agreement as to final orders, including costs and any interest claim, within fourteen (14) days by filing consent orders in the registry consistent with these reasons.
2. In default of agreement pursuant to order (1), the parties are to approach my Associate within the same fourteen days with a view of relisting the matter before me for any argument as to final orders as indicated.
3. In the case that (2) applies, each party is to submit proposed draft orders to my Associate within the time specified therein. [3]
Pursuant to (2) and (3) above, the parties advised that they could not reach an agreement as to costs.
The Plaintiff proposed a draft order that there should be judgment in its favour in the sum of $11,900 plus costs on an ordinary basis as agreed or assessed.
The Defendant proposed a draft order that there should be judgment in favour of the Plaintiff but that pursuant to s 208 of the 2010 Act, the Plaintiff is to pay the Defendant's costs as agreed or assessed. The Defendant also proposed that pursuant to s 135 of the Civil Procedure Act 2005 (NSW) [4] the execution of judgment be stayed pending payment of its costs.
Following enquiries through my Associate, both parties indicated a preference for the matter to be determined on the basis of written submissions. [5] In accordance with a timetable agreed by the parties, [6] I made orders in chambers on 4 March 2020 as follows:-
1. The parties' application for costs will be heard on the papers;
2. Defendant to serve its submissions by 3 March 2020;
3. Plaintiff to serve its submissions by 5 March 2020;
4. Defendant to serve any submissions in reply by 9 March 2020.
The Defendant submitted written submissions on 3 March 2020. The Plaintiff submitted written submissions on 9 March 2020. There were no submissions in reply.
In those submissions, the Defendant's primary position was that pursuant to s 208 of the 2010 Act. Alternatively, it contended that in accordance with r 42.35 of the Uniform Civil Procedure Rules 2005 (NSW) [7] the Court should make no order as to costs.
The Plaintiff contended that an order for costs should be made in its favour pursuant to UCPR 42.1.
The Plaintiff also advanced a claim for interest pursuant to s 100 of the 2005 Act.
Following a request to both parties through my Associate, I was informed by the Defendant on 10 March 2020 and by the Plaintiff on 11 March 2020 that should an order by made under s 208 of the 2010 Act the "costs in such amount as the Court determines" should be expressed as "costs on the ordinary basis in such amount as may be agreed or assessed." Otherwise neither party sought to address the matter in oral argument nor in the circumstances consider this further.
[2]
Submissions
The Plaintiff drew attention to the Defendant's denials in the context of its Defence, the Defendant's failure to reasonably negotiate and the Plaintiff's ultimate success on issues of contention. It contended that in these circumstances the Defendant should not be rewarded for taking an unreasonable position. [8]
The Plaintiff's argued that its claim in the proceedings was for damages for breach of contract which is a remedy not available in the NSW Civil and Administrative Tribunal [9] and therefore s 208 of the 2010 Act has no application. [10]
Alternatively, it was contended that it would be unjust and inappropriate to impose s 208 of the 2010 Act and the Plaintiff should not be penalised by way of adverse costs order for underestimating the extent to which the Court would exercise its discretion in the award of damages. [11]
The Plaintiff argued that the subject matter of the proceedings involved extensive consideration of legal issues being arguably beyond the scope of consideration of the Tribunal, such that it cannot be said that the proceedings in the Court were not warranted. The Plaintiff further argued that the nature of the breach and the enquiry into the factual circumstances warranted the commencement of the proceedings in the District Court. [12]
The Defendant submitted that the subject matter of the dispute was an inflated claim for contract damages that were calculated as an abatement of rent in the amount of 85% of the total rent paid over a 3 year period. It submitted that the subject matter was not unique or of great legal complexity and could and should have been made in a timely manner in the Tribunal rather than in the District Court where "the Plaintiff chose to roll the dice rather than realistically assess the claim." [13]
The Defendant argued that the amount of damages proposed being $11,900 fell well within the jurisdiction of the Tribunal and that the 2010 Act otherwise made adequate provision for the Plaintiff to enforce his rights either by a realistic claim for abatement or seeking orders for repairs. [14]
In the event that the first limb of s 208 was satisfied the Defendant argued that that it would not be unjust to award costs in its favour given:-
1. The Plaintiff admitted having previously made an application to NCAT seeking $17,443, but withdrew that application [apparently] on the basis that it was beyond the jurisdictional limit of NCAT. The Plaintiff then grossly inflated his claim to $170,000, being the equivalent of approximately 85% of the sums paid in rent over the entire period [15] of the tenancy without any apparent reason for doing so, citing merely that he had "done a lot of research". In the Defendant's submission, the Plaintiff's claim for such an amount was manifestly unreasonable and excessive.
2. At [219] of the reasons for judgment, the Court was said to make clear, a large part of the claimed loss of amenity was either exaggerated or not credible. The Defendant complained that it was forced to answer the claim for the losses over the entire period of the tenancy where the Court found it would be "inconceivable" to continue to reside in the property if the property was uninhabitable to the extent claimed.
3. The commencement of such proceedings in the District Court reasonably necessitated the Defendant incurring legal costs in defending the claim. Such costs would have likely been wholly avoided in NCAT.
4. The Plaintiff was unreasonable in his offers of compromise, particularly when one has regard to s 208 of the 2010 Act and, moreover, UCPR 42.35 and the Plaintiff's failure to make any appropriate offers of compromise further necessitated the defence of the proceedings and incurring the costs associated with that exercise.
5. Notwithstanding the Plaintiff was partially successful on its claim, it was not successful on its claim for abatement. It was contended that the Court ultimately found that compensation could be awarded under s. 187 of the 2010 Act and proceeded to deliver a judgment on that basis. Such a claim was never advanced by the Plaintiff. [16]
[3]
Consideration
Section 208 of the 2010 Act provides:
Costs in court proceedings
If a court in any proceedings is of the opinion that, having regard to the subject-matter of the proceedings, the taking of the proceedings was not warranted in the circumstances of the case because this Act makes adequate provision for the enforcement by the Tribunal of the rights concerned, the court, unless it is of the opinion that it would be unjust to do so, must order the plaintiff to pay the defendant's costs in such amount as the court determines.
Five things about the section are to be noted.
Firstly, the focus in s 208 is on the "rights concerned."
Secondly in forming the requisite opinion, the Court must have "regard to the subject-matter of the proceedings."
Thirdly, to the extent s 208 refers to the Tribunal, it is in the context that the 2010 Act "makes adequate provision" for the enforcement by it of the "rights concerned." "Adequate provision" does not mean identical provision. The question of adequacy is to be determined by asking whether the 2010 Act provided a means sufficient for the purpose of enforcing the relevant rights. The question to be posed is could the Plaintiff have obtained relief under the 2010 Act which would have enforced (in the sense of brought about in a legally binding way) the same outcome secured by the declaration which the Court has decided it will make. [17]
Fourth, only if the Court is satisfied of the matter identified in the preceding paragraph can it then go on to consider the causative link which must inform the requisite opinion, namely that the taking of the proceedings was not warranted in the circumstances because the 2010 Act makes adequate provision for the enforcement of those rights.
Fifth, even if the requisite opinion is formed the Court cannot make an order for the Plaintiff to pay the Defendant's costs if it is of the opinion that it would be unjust to do so.
In EB 9 & 10 Pty Ltd v The Owners Strata Plan 934 [18] Barrett AJA referred to a somewhat analogous provision in s 226(2) of the Strata Management Act 1996 (NSW). [19] Section 226(2) of the 1996 Act employed the words "not justified" as opposed to "not warranted" contained in s 208 of the 2010 Act. Bearing in mind that distinction, Barrett JA stated:-
In the same way, s 226(2), by employing a "justified" criterion, is concerned with the appropriateness (or inappropriateness), in the whole of the circumstances, of the pursuit of the particular court proceedings rather than proceedings under the statutory scheme of dispute resolution, with the question of appropriateness (or inappropriateness) being judged by reference to the results, in terms of "enforcement" of the relevant right or remedy, that the respective procedural avenues can produce, having regard to the "subject-matter" of the dispute. [20]
Overall, the question to be asked on whether s 208 applies, is could the Plaintiff have obtained relief under the 2010 Act which would have enforced (in the sense of brought about in a legally binding way) the same outcome secured by the Court proceedings by the declaration. [21]
Section 187 of the 2010 Act confers on the Tribunal power to award compensation amongst other remedies.
The power of this Court to award compensation in damages arises in its civil jurisdiction. [22] It was this power that the Plaintiff successfully engaged.
One variation between s 187 of the 2010 Act and the Court's jurisdiction is that the Court can award interest under s 100 of the 2005 Act. However, it has been held that the Tribunal can also do so within its power to order compensation under s 187 of the 2010 Act. [23]
The Plaintiff in this instance claimed interest and the Defendant advanced no reason why interest should not be awarded.
I accept that the Plaintiff is entitled to an award of pre judgment interest on the judgment amount from 12 December 2017 to date in accordance with s 100 of the 2005 Act and District Court Practice Note 15 clause 5.
The Plaintiff accepts that even with interest included the amount recovered falls short of the $15,000 jurisdictional limit of the Tribunal under s 187 of the 2010 Act. [24] It nevertheless contended that the relief it sought was not a remedy available under the 2010 Act.
The fact that the Plaintiff sought "damages" and "interest" in this Court does not preclude the application of s 208 if to use the words of the 2010 Act it is found it "makes adequate provision for the enforcement by the Tribunal of the rights concerned." [25]
Clearly, the Court and the Tribunal have different monetary limits to their respective jurisdictions.
However in light of the rights vindicated in this Court I am satisfied that the 2010 Act made adequate provision for their enforcement in the Tribunal. [26]
The order otherwise mandated still cannot be made if the Court is of the opinion that it would be unjust to do so. This requires some consideration of the purpose of the section.
Section 208 has its origins in s 120A of the Residential Tenancies Act 1987 (NSW). [27] When first enacted, that section read:-
If a court in any proceedings is of the opinion that, having regard to the subject-matter of the proceedings, the taking of the proceedings was not warranted in the circumstances of the case because this Act makes adequate provision for the enforcement by the Tribunal of the rights concerned, the court shall order the plaintiff to pay the defendant's costs in such amount as the court determines.
That wording did not contain the phrase "unless it is of the opinion that it would be unjust to do so."
At the time of s 120A's introduction, the Minister for Housing stated:-
Jurisdictional disputes will be minimized by the provision of a cost disincentive to any party who pursues unjustifiably a tenancy issue through the general court system. These provisions improve the tribunal's responsiveness, efficiency, and economy. [28]
The Explanatory Note to the Residential Tenancies Bill 2010 (NSW), which sought the repeal of the 1987 Act, did not shed light on the reason to include the additional phrase now enacted in the s 208 of the 2010 Act, but rather stated:-
Division 4 of Part 10 (section 208) of the proposed Act re-enacts section 120A of the 1987 Act. [29]
There is no clear discernible reason as to why this phrase was inserted into s 208. Nevertheless, the phrase has been used in other statutory contexts. For instance, Fryberg J stated in R v Bowen:- [30]
Technically, the process of considering that issue does not involve the exercise of a judicial discretion. However it is a process which is closely akin to that involved in exercising a discretion. It involves the formation of a judgment about whether something would be unjust. The concept of justice is imprecise and value-laden, and inevitably, reasonable minds will form different opinions on the question in the same set of circumstances. [31]
As I see it, the purpose of s 208 as now enacted is not to punish a Plaintiff who misjudges their ultimate success falling short of the Tribunal's jurisdictional limit, but rather to act as a disincentive to bring proceedings which were not warranted in the circumstances described.
The Plaintiff in this case was successful in his claim albeit not to the extent that he claimed. Section 208 is not dependent whether UCPR 42.15 or Calderbank [32] principles were engaged. Nor do I consider that the position of the parties in relation to negotiations is of assistance to the formation of the opinion referred to.
In this case, the ultimate award of damages and interest falls within the upper end of the Tribunal's monetary limit. The question is not whether the extent of the loss as claimed by the Plaintiff was unreasonable but whether it would be unjust to make an order,
Aside from questions of liability, the assessment of quantum was intertwined with a determination of the nature of the landlord's obligation, when any breach occurred and the basis on which loss was to be assessed. That determination also involved a degree of factual and legal analysis as disclosed in my reasons. I accept that there was some complexity which added to the uncertainty of the assessment and the question of whether to bring the proceedings before the Tribunal was not straight forward. Whilst the Plaintiff fell short of his expectations, I accept that the uncertainty of whether the matter fell within the monetary limit of the Tribunal's jurisdiction was such that it would be unjust to order him to pay the Defendant's costs.
[4]
Submissions
The Defendant's alternative argument was that the Plaintiff should be denied costs based on UCPR 42.35. That rule provides that
(1) This rule applies if:
(a) in proceedings in the District Court, a plaintiff has obtained a judgment against the defendant or, if more than one defendant, against all the defendants, in an amount of less than $40,000, and
(b) the plaintiff would, apart from this rule, be entitled to an order for costs against the defendant or defendants.
(2) An order for costs may be made, but will not ordinarily be made, unless the District Court is satisfied the commencement and continuation of the proceedings in the District Court, rather than the Local Court, was warranted.
The Defendant repeated its submissions referred to at [19] and otherwise commented that the Plaintiff had significantly inflated his claim to attract the District Court jurisdiction rather than proceed to the Local Court.
The Plaintiff submitted that the factual circumstances and complex legal consideration meant that the commencement and continuation of the proceeding in this Court was warranted. He contended that considerations given to making that determination are more complex than would have been given by a lower Court.
[5]
Consideration
The Plaintiff having succeeded would ordinarily be entitled to an award of costs in its favour. [33] Even accepting the Defendant's characterisation of the Plaintiff's claim, it did not seek to protect its position by an appropriate offer engaging UCPR 42.15 or Calderbank principles. Had it done so, UCPR 42.35(1)(b) may have had no application. The issue is whether UCPR 42.35(2) operates to disentitle the Plaintiff from a favourable costs order.
Matters relevant to this issue were discussed in Singapore Airlines Cargo Pty Limited v Principle International Pty Ltd (No 2). [34] In short, the Court cited factual complexity as a relevant factor in determining whether a claim should have been brought in the District Court. In particular it was noted that the claim involved the consideration of the expert evidence in relation to the meaning and application of Art 18(2) of the Montreal Convention. [35]
In Averkin v Insurance Australia Ltd (No 2) [36] the Court of Appeal stated:
[15]…The underlying purpose of the rule is clear: it is to discourage people from commencing proceedings in a higher court where they are well within the jurisdictional limits of a lower court: Rousianos at 70. Small claims are ordinarily more efficiently and more cheaply litigated in a court of appropriately limited jurisdiction. Costs are of especial importance in connection with small claims, because costs can readily exceed the amount at stake…
Although this matter was heard over three days, it effectively occupied two days in a running list as both the first and third were effectively half days. Whilst I accept that the analysis involved some complexity, there was no expert evidence and the principal contractual provisions had been subject of previous consideration. In my view the matter fell well within the Local Court's jurisdiction and capacity which extends to claims up to $100,000.
Moreover, the uncertainty with respect to adequacy of the monetary jurisdiction of the Tribunal is not replicated in respect of the Local Court.
The claim initially advanced in the Tribunal sought $17,443. The ultimate pursuit in this Court of $107,000 was based on a claim of significant loss of use over the term of Plaintiff's tenancy. As I stated in my reasons for judgment, it is inconceivable that persons in such claimed circumstances would have continued to reside in the subject property for the length of time in question renewing the tenancy on two subsequent occasions. [37] No explanation was provided on the evidence of how the claim escalated except Mr Pursell's assertion to having conducted further research and obtained greater awareness. [38]
Beyond that, the Plaintiff's case was initially opened based on abatement but ultimately reformulated as one based on damages referable to the rent paid or alternatively nominal damages. [39]
Overall, the Plaintiff has not drawn attention to any basis upon which the Court could be affirmatively satisfied that the commencement and continuation of the proceedings in this Court as opposed to the Local Court was warranted. [40]
Accordingly the ordinary rule in UCPR 42.35 should apply.
[6]
Orders
For these reasons given in this matter, including those above, I order:
1. Verdict and judgment for the Plaintiff in the sum of $11,900
2. The Defendant is to pay interest on the said sum on the amount from 12 December 2017 to date in accordance with s 100 of the 2005 Act and District Court Practice Note 15 clause 5
3. No order as to costs with the view that each party is to pay their own costs
[7]
Endnotes
Principal judgment dated 13 February 2010.
Hereinafter the '2010 Act'.
At [224].
Hereinafter the '2005 Act'.
Section 62(3)(e) of the 2005 Act.
Email Jeremy Bridgen, solicitor for the Defendant, dated 4 March 2020.
Hereinafter the 'UCPR'.
Plaintiff's Written Submissions dated 9 March 2020 at [2(a)-(c)], [3]-[7] and [12].
Hereinafter "NCAT' or ' the Tribunal'
Plaintiff's Written Submissions dated 9 March 2020 at [2(d)] and [8].
Plaintiff's Written Submissions dated 9 March 2020 at [2(e)].
Plaintiff's Written Submissions dated 9 March 2020 at [10].
Defendant's Written Submissions dated 3 March 2020 at [5].
Defendant's Written Submissions dated 3 March 2020 at [8]-[9].
The claim was actually for $107,000 and it was put to the Plaintiff that the claim was for 80% of the rent paid: see T 42.04-.09; 43.21-.23.
Defendant's Written Submissions dated 3 March 2020 at [10(a)-(e)].
EB 9 & 10 Pty Ltd v The Owners SP 934 (No 2) [2018] NSWSC 546 at [63] Kunc J and EB 9 & 10 Pty Ltd v The Owners Strata Plan 934 [2018] NSWCA 288 at [68] (Barrett AJA, with Meagher and Gleeson JJA agreeing).
[2018] NSWCA 288]; (Meagher and Gleeson JJA agreeing).
Hereinafter the '1996 Act'.
at [68]
EB 9 & 10 Pty Ltd v The Owners SP 934 (No 2) [2018] NSWSC 546 per Kunc J at [33].
See s 44 of the District Court Act 1973 (NSW).
See discussion in Allan Anforth, Peter Christensen, Christopher Adkins, Residential Tenancies Law and Practice New South Wales (2017, 7th ed, Federation Press) at [2.187.15].
Pursuant to reg 23 of the Residential Tenancy Regulation 2010 (NSW).
See also s 6 of the 2010 Act.
See EB 9 &10 Pty Ltd v The Owners Strata Plan 934 [2018] NSWCA 288 at [68] and [71]]. Although the question of different time limits was raised in evidence, this was not advanced as a reason for the bringing of Court proceedings. See Pursell v Eversham Close Pty Ltd (No 1) [2020] NSWDC 372 at [88].
Hereinafter the '1987 Act'.
Residential Tenancies (Amendment) Bill 1987 (NSW), Second Reading Speech, Minister for Housing (Mr Schipp), 3169.
Explanatory Note to Residential Tenancies Bill 2010 (NSW) at page 18.
Referring to s 147 of the Penalties and Sentences Act 1992 (Qld).
[1997] 2 Qd R 379 at 388.
Calderbank v Calderbank [1975] 3 All ER 333.
UCPR 42.15.
[2017] NSWCA 340.
[2017] NSWCA 340 at [18]-[20].
[2016] NSWCA 150.
Pursell v Eversham Close Pty Ltd (No 1) [2020] NSWDC 372 at [219].
T 55.37-56.04.
T 118.1-.15 and T 136.9-.29,
Shield Mercantile Pty Ltd v Citigroup Pty Ltd [2013] NSWSC 287 at [18]-[24].
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Decision last updated: 21 October 2020